Agriculture and FoodDevelopmentEconomicsEducationEmploymentEnergyEnvironmentFinance and InvestmentGovernanceIndustry and ServicesNuclear EnergyScience and TechnologySocial Issues/Migration/HealthTaxationTradeTransportUrban, Rural and Regional Development

Labour Market Reforms in Portugal 2011-15

A Preliminary Assessment

This report, commissioned by the XIX Government of Portugal, provides an evaluation of the comprehensive labour market reforms undertaken in Portugal over the period 2011-2015. It describes reforms in the areas of employment protection legislation, unemployment benefits, activation, collective bargaining, minimum wages and working time. The report reviews the reforms in detail and assesses the available evidence on the impact they have had on the labour market. The report concludes that the Portuguese labour market reforms were a move in the right direction. However, despite the progress made, many challenges remain and some of the reforms may not have gone far enough. Unemployment remains high and this situation has fuelled an increase in both poverty and long-term unemployment The labour market remains highly segmented and, in the context of very low inflation, the presence of downward nominal wage rigidity is likely to remain a barrier to the competitiveness of the Portuguese economy – unless productivity growth is strengthened.

Executive summary

Portugal was badly hit by the global financial crisis and suffered unprecedented job losses. Total employment fell by 767 000 (-15%) between mid-2008 and the beginning of 2013 and, at its peak, the unemployment rate stood at 17.3% (up from 8.6% at the beginning of 2008). The crisis added to Portugal’s labour market problems. Unemployment had been rising even before the crisis (from 5.1% in 2000), its labour market was highly segmented, and the long-term unemployment rate was among the highest observed in the OECD.